If the next president of the United States is Donald Trumpthe world has to prepare for uncertainty and, at worst, a trade war.
– Customs are the best invention ever, Trump glowed at an election event in Michigan in September.
Trump has talked about tariffs constantly. He says he will make import tariffs the centerpiece of his economic policy if he is elected president.
It would be a real financial bomb.
According to Trump, tariffs of as much as 60 percent are planned for Chinese products. There would be tariffs of 10–20 percent on other, i.e. also European, products.
Trump also imposed tariffs in his first term, which Pres Joe Biden largely held. However, they only concerned part of the imports. Now it would be a much broader operation, for nearly a century.
Trump claims the tariffs would bring US manufacturing companies back home from overseas. Foreign companies would also open factories in the United States to avoid customs fees, Trump says. Customs revenues would finance, among other things, tax reductions.
For Finns, Trump’s tariffs could mean, among other things, a rise in prices and an increase in unemployment. It is certain that the general uncertainty of the economy would increase.
If Trump were to drastically increase trade barriers, it would have a negative impact on the whole of Europe and the growth of the global economy.
asked two economists how Trump’s trade policy would affect Finns.
1. What would happen to the prices of consumer goods?
Consumers suffer from tariffs directly, as tariffs typically increase the prices of goods.
The prices of some US products could rise if the EU reacted to Trump’s actions by imposing counter-tariffs.
– The direct significance of Trump’s tariffs for the Finnish consumer would be relatively small, says Nordea’s chief economist Wind Birch.
This is because the share of American consumer products in Finland is small. Finland imports from the United States, for example, products of the chemical industry, crude oil, gas, electrical equipment, industrial machinery and equipment, and passenger cars.
The assessment of the whole is complicated by the fact that it is not known whether the Trump administration would impose tariffs not only on goods but also on services. Tariffs could also be valid only for a limited time or target only certain sectors.
It is also possible that the prices of some products in Europe would fall, says the Forecasting Manager of the Bank of Finland’s Monetary Policy and Research Department Juuso Vanhala.
This could happen in the event that China tries to dump its own products on the European market after Trump imposes huge tariffs on China.
– However, the situation would change if the EU started countermeasures, i.e. raised tariffs on China, Vanhala says.
2. What would happen to jobs?
The United States is Finland’s most important export country. Trump’s trade policy would also affect Finns through jobs.
– The most direct impact would be on Finnish companies that export products to the United States and thus on their employees, says Juuso Vanhala.
Finland exports industrial machinery and equipment, engines, paper products, pharmaceutical products and medicines to the United States.
Finland would also suffer from the fact that the tariffs would affect the entire EU’s trade with the United States. For example, Finland exports a lot of intermediate industrial products to Germany. in Germany research institute IW has calculated that the trade war caused by Trump could cost Germany up to 180 billion euros during Germany’s next term in office.
Finnish companies would be in trouble if other European countries’ exports to the United States would also weaken.
– The more companies this affects, the more widely it affects the Finnish economy. If exports slow down, employment will decline, Vanhala says.
– Of course, this affects the lives of households and their consumption opportunities.
3. What about mortgage debtors?
Real estate millionaire Trump can have an indirect effect on the Finnish housing market and loan interest.
The increase in economic uncertainty could delay the revival that has been expected in the Finnish housing market due to falling interest rates, says Tuuli Koivu, Nordea’s chief economist.
Trump’s actions could either lower or raise interest rates, he says.
– The basic idea is one in which euro interest rates fall slightly due to uncertainty and slower economic growth.
An individual mortgage debtor can benefit from a lower interest rate. At the same time, however, the threat of unemployment increases, because the reason for the interest rate cut is the economy’s weak growth prospects.
On the other hand, economists in the United States fear that the rise in prices caused by Trump’s tariffs could start a new cycle of inflation. The US central bank could respond to that by raising interest rates, and the European central bank, the ECB, might have to follow suit.
4. Why would a trade war be poison for Finland?
Trade barriers are poison for Finland because the Finnish economy is so dependent on international trade.
Tuuli Koivu summarizes in four points how the aggressive trade policy promised by Trump could affect the Finnish economy on a more general level.
First, Trump’s possible accession to power would increase the general uncertainty of the economy.
Secondly, investments in Europe would slow down if China and Europe started raising their own tariffs. The worsening cycle of the trade war would inoculate the growth of the world economy.
Thirdly, Finland is more dependent than before on the United States, whose economy has been doing well. If Trump’s trade policy and possible restrictions on immigration slow US growth, the world economy would lose one of its engines, which would also affect Finland.
However, Trump’s security policy could be the most important, says Koivu.
The policies of Trump, who is considered unpredictable, could affect how secure the Finnish consumer feels about his position.
– If Trump were to mess up the security environment in one way or another, it could have big implications for the drivers of Europe’s domestic economy, says Koivu.
5. Would Trump finally carry out his intentions?
It is not yet known whether Trump’s speeches are mainly a tactic, the purpose of which is to gain a good position in future trade negotiations with the EU and China.
Finnish economists say there is a lot of uncertainty about the implementation of customs duties and their scale.
Tuuli Koivu reminds us that Trump’s campaign speeches were tough during the first season. Trump painted much higher tariffs on China than he ultimately decided on. Europe, on the other hand, survived only with tariffs on products from certain sectors.
Now the fear is that Trump would be more radical than in his first term.
Counter candidate Terrible Harris has criticized Trump’s intentions. Harris also says he intends to use tariffs, but “in a targeted manner”.
In Trump’s first term, the bill for tariffs fell largely on Americans for households and businesses, it is stated in different calculations.
According to researchers the new tariffs would also increase the costs of American companies and reduce the net incomes of both the low-income and the rich.
According to Koivu, Trump can surprise both negatively and positively.
The reason for that is that the US business community quite strongly supports Trump as president, says Koivu.
– He is a real estate investor and businessman who, in his first term, started his day by looking at stock exchange rates and often referred to them in his speeches. Possibly even now he would read the bad signs of the economy just as carefully, Koivu reflects.